Professional Documents
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United v. Mihs, Ariz. Ct. App. (2015)
United v. Mihs, Ariz. Ct. App. (2015)
OPINION
Presiding Judge Andrew W. Gould delivered the opinion of the Court, in
which Judge Maurice Portley and Judge Jon W. Thompson joined.
G O U L D, Judge:
1
This appeal presents the question of whether two health care
providers, Aurora Behavioral Healthcare (Aurora) and Maricopa
Integrated Health System (MIHS) (collectively the Providers), may
compel arbitration of coverage claims arising under Medicare and ERISA
health care plans. The Providers seek to compel arbitration pursuant to an
arbitration clause in their agreement with United Behavioral Health
(UBH), the entity which administers the subject Medicare and ERISA
benefit plans. The arbitration clause is expressly governed by the Federal
Arbitration Act (FAA). See 9 U.S.C. 1, et seq.1
2
UBH cannot be compelled to arbitrate the Providers
Medicare coverage claims.
We conclude that Congress intended
Medicares administrative procedure to provide the exclusive remedy for
resolving Medicare coverage claims, and that this procedure overrides the
FAAs presumption favoring arbitration.
3
However, because the record is not clear as to whether Aurora
has standing to assert its ERISA coverage claims, we do not address the
arbitrability of Auroras ERISA claims. We therefore vacate the trial courts
order compelling arbitration of Auroras ERISA claims, and remand for
further proceedings consistent with this opinion.
FACTS AND PROCEDURAL HISTORY
4
UBH administers various types of health insurance plans,
including Medicare and ERISA benefit plans. Aurora and MIHS are
facilities that provide mental-health and substance-abuse treatment. The
Providers each entered into a Facility Participation Agreement (Facility
Agreement) with UBH allowing them to participate in UBH networks that
provide mental-health and substance-abuse health care services. The
Absent material revisions after the relevant dates, statutes and rules
cited refer to the current version unless otherwise indicated.
1
11
The Providers contend that the language of the arbitration
clause in the Facility Agreement is extremely broad, requiring the parties to
arbitrate any disputes about their business relationship. As a result, the
Providers argue UBH is contractually bound to submit their claims to
binding arbitration.
12
The Facility Agreement provides that the question of
arbitrability is governed by the FAA. Under the FAA, [d]eterminations
of arbitrability, like the interpretation of any contractual provision, are
subject to de novo review. Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719
(9th Cir. 1999); see AT&T Tech., Inc. v. Commcns Workers of Am., 475 U.S. 643,
648 (1986) (stating that arbitrability is, as a matter of contract, a question of
law for a court to decide).
13
The FAA embodies a strong federal policy in favor of
arbitration. CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 173 (3d Cir.
2014) (quoting Sweet Dreams Unltd., Inc. v. Dial-A-Mattress Intl. Ltd., 1 F.3d
639, 641 (7th Cir. 1993)). Congress, however, may override the [FAAs]
presumption favoring arbitration agreements by a contrary provision in
another statute. The burden of demonstrating such congressional intent
rests with the party opposing arbitration. Bird v. Shearson Lehman/Am.
Express, Inc., 926 F.2d 116, 119 (2d Cir. 1991) (citing Shearson/Am. Express,
Inc. v. McMahon, 482 U.S. 220, 226 (1987)). Congress intent will be
deducible from [the statutes] text or legislative history, or from an inherent
conflict between arbitration and the statutes underlying purposes.
McMahon, 482 U.S. at 227.
14
In this case, the language of the arbitration clause is extremely
broad; it reaches beyond the Facility Agreement to encompass all aspects of
the parties business relationship. See Lakeland Anesthesia, Inc. v. United
Healthcare of La., Inc., 871 So. 2d 380, 392 (La. Ct. App. 2004) (stating that an
arbitration provision that covers any disputes about their business
relationship is not limited in scope to the agreement itself); Aztec Med.
Servs., Inc. v. Burger, 792 So. 2d 617, 623-24 (Fla. Dist. Ct. App. 2001) (same).
15
Based on the broad language of the arbitration clause and the
FAAs presumption favoring arbitration, we conclude the Providers may
compel arbitration unless there is a contrary provision in Medicare or
ERISA expressing Congress intent that these claims are nonarbitrable.
16
In determining whether arbitration of the Providers claims
conflicts with the Medicare Act, we must examine the text and legislative
history of the Act. See McMahon, 482 U.S. at 227.
17
Medicare is a federal health insurance program benefitting
individuals who are over 65, or have a disability, or are suffering from endstage renal disease. Estate of Ethridge v. Recovery Mgmt. Sys., Inc., 235 Ariz.
30, 33, 7 (App. 2014); see 42 U.S.C. 1395c. The Medicare program is
administered by the Centers for Medicare and Medicaid Services (CMS),
a division of the Department of Health and Human Services (HHS). 42
U.S.C. 1395hh, -1395kk; Estate of Ethridge, 235 Ariz. at 33, 7. Medicare
provides two options for hospital and medical benefits: (1) Medicare Parts
A and B, or traditional Medicare, and (2) Medicare Part C, known as
Medicare Advantage. 42 U.S.C. 1395w-21; Estate of Ethridge, 235 Ariz. at
34, 10.
A.
Medicare Part C
18
Here, UBH administered Medicare Part C plans. Medicare
Part C provides Medicare beneficiaries with the option of contracting with
a private insurance company to obtain Medicare benefits. 42 U.S.C.
1395w-21, 1395w-27; Estate of Ethridge, 235 Ariz. at 34, 10. Under
Medicare Part C, CMS contracts with private insurers, or Medicare
Advantage Organizations (MAOs), to provide medical benefits for
Medicare beneficiaries; in return, the MAOs receive a fixed monthly
capitation payment for each Medicare beneficiary enrolled in their benefit
plan. 42 U.S.C. 1395w-21, --23(a), --1395w-27, --1395w-28; Estate of
Ethridge, 235 Ariz. at 35, 16. MAOs then contract with health care
providers to furnish medical services. 42 U.S.C. 1395w-23(a)(1)(A);
RenCare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555, 557-59 (5th
Cir. 2004); 42 C.F.R. 422.2. Under an MAOs contract with CMS, a
capitation fee is paid regardless of the value of services provided to the
beneficiary, and the MAO assumes full financial risk for providing
Medicare benefits to the beneficiary. 42 U.S.C. 1395w-25(b); RenCare, 395
F.3d at 557-59.
19
Despite the differences in traditional Medicare and Medicare
Part C, the benefits under both options are Medicare benefits. 42 U.S.C
1395w-21(a). Medicare Part C is a federal program operated under
[f]ederal rules, and thus, while Part C participants may elect to opt out
of traditional Medicare, they do not opt out of Medicare. H. R. Rep. No.
20
Congress and the Secretary of HHS2 have promulgated
numerous statutes and regulations concerning standards for Medicare Part
C coverage.3 Do Sung Uhm v. Humana, Inc., 620 F.3d 1134, 1150 (9th Cir.
2010); Mass. Assn of Health Maint. Orgs. v. Ruthardt, 194 F.3d 176, 180 (1st
Cir. 1999); Ardary v. AETNA Health Plans of Cal., Inc., 98 F.3d 496, 498 (9th
Cir. 1996). For example, MAOs furnishing benefits to Part C participants
must provide the same coverage and benefits as those provided to Medicare
Part A and B participants. 42 U.S.C. 1395w-22(a)(1)(B); 42 U.S.C.
1395mm(c)(2)(A); 42 C.F.R. 417.440(b)(1). MAOs must also provide
medically necessary treatment, comply with CMS manuals and directives
regarding benefit coverage, and ensure access to emergency and skilled
Pursuant to 42 U.S.C. 1395ff(a), the determination whether an
individual is entitled to benefits . . . is entrusted to the Secretary [of HHS]
in accordance with regulations prescribed by him or her. McCall v.
PacifiCare of Cal., Inc., 21 P.3d 1189, 1193 (Cal. 2001).
2
25
The Providers assert, however, that their claims are not
coverage claims subject to the Medicare administrative appeals process.
Rather, the Providers argue that their claims are payment disputes that do
not involve Medicare or the Medicare administrative process. Specifically,
the Providers allege that UBH determined the members services were
covered, but then failed to pay the Providers the full amount owed for the
services pursuant to the rates set out in the Facility Agreement.
26
Medicare coverage claims involve a beneficiarys right to
receive coverage for medical treatment, supplies or services. Blue Cross &
Blue Shield of Ala., 90 So. 3d at 331. In a coverage claim, the harm, or injury,
is based on the allegation that benefits were improperly denied; as a result,
the remedy is reimbursement of benefits. Uhm, 620 F.3d at 1143-44; see
Heckler, 466 U.S. at 618 (coverage claim involved denial of coverage for
certain surgical procedures); Giesse, 476 F. Supp. 2d at 740, 743 (coverage
claim involved denial of benefits for post-hospital skilled nursing facility).
As a result, proof of a coverage claim necessarily involves reference to and
interpretation of a Medicare benefit plan, as well as Medicare coverage
standards. Blue Cross & Blue Shield of Ala., 90 So. 3d at 164; cf. Montefiore
Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 331 (2d Cir. 2011).
27
In contrast, claims that are wholly collateral to a claim for
coverage do not arise under the Medicare Act, and are not subject to
Medicares administrative procedure. Heckler, 466 U.S. at 618; see Uhm, 620
F.3d at 1145; Ardary, 98 F.3d at 499, 501; McCall, 21 P.3d at 1194-95, 1197-98.
The harm involved in a wholly collateral claim is not the denial of coverage,
and therefore the remedy sought is not payment of benefits. Uhm, 620 F.3d
at 1145; see Ardary, 98 F.3d at 500 (wrongful death claim for compensatory
and punitive damages based on providers failure to transfer or airlift
decedent to intensive cardiac care facility not subject to Medicare
administrative review process); McCall, 21 P.3d at 1200 (plaintiffs claims
for emotional distress, medical negligence and fraud, seeking tort damages
for injuries suffered due to MAO and providers delays in providing
referrals to specialists, were wholly collateral to Medicare and not subject
to Medicare administrative appeals process). Moreover, a wholly collateral
claim is not focused on interpreting a Medicare benefit plan or Medicare
30
In determining whether a claim is inextricably intertwined
with a claim for coverage, thereby making it a coverage claim, a partys
characterization or framing of its claim is not dispositive. Rather, a court
must determine if the claim is, at bottom, a claim for coverage. Heckler,
466 U.S. at 614. A party cannot evade the Medicare administrative process
by creatively and cleverly conceal[ing] a coverage claim as arising under
some source other than Medicare. Uhm, 620 F.3d at 1141-42; see Affiliated
Profl Home Health Care Agency v. Shalala, 164 F.3d 282, 286 (5th Cir. 1999)
(finding that claims, despite being presented as constitutional claims, were
inextricably intertwined with a claim of entitlement to Medicare benefits
and subject to the Medicare administrative appeals procedure).
31
Here, the Providers seek to avoid the mandatory Medicare
administrative procedure by casting their claims as payment disputes that
do not arise under Medicare. The trial court in the MIHS case agreed,
concluding the treatments were pre-authorized, and therefore determined
to be covered services by UBH.
32
The trial courts determination in the MIHS case is not
supported by the record. UBH authorized coverage for an initial period of
treatment. However, when MIHS sought approval of continued acute
inpatient care, UBH denied the request on the grounds acute inpatient care
was no longer medically necessary. UBH notified MIHS of its denial of
coverage prior to the dates of service. Accordingly, the services for which
the Providers seek payment were not pre-authorized or determined by
UBH to be covered services. Bennett v. Baxter Grp., Inc., 223 Ariz. 414, 419,
16 (App. 2010) (stating that the appellate court will not defer to the trial
courts factual findings if they are clearly erroneous).
33
Moreover, despite the Providers efforts to recast their claims
as payment claims, the record shows that they are coverage claims. At
bottom, the Providers are challenging UBHs denial of coverage for
continued acute inpatient care on the grounds the treatment was not
medically necessary. This is a coverage claim. Blue Cross & Blue Shield of
Ala., 90 So. 3d at 167; see Lone Star OB/GYN Assoc. v. AETNAHealth Inc., 579
F.3d 525, 531 (5th Cir. 2009) (holding that a coverage claim involves a
determination of benefits under the terms of a plan i.e., what is
medically necessary or a Covered Service). Additionally, the remedy
sought by the Providers is a coverage remedy: reimbursement for what they
contend were medically necessary services. See supra, 26.
10
35
We cannot ignore Congress intention that Medicares
mandatory administrative procedure provides the exclusive remedy for the
Providers Medicare coverage claims. As a result, the Providers coverage
claims are not subject to arbitration under the FAA, and UBH cannot be
compelled to arbitrate these claims.4
III.
36
Auroras coverage claims involving the members ERISA
benefit plans are subject to ERISAs exclusive legal standards and remedies.
Montefiore, 642 F.3d at 327-28 (based on ERISA 502(a)(1)(B), 29 U.S.C.
1132(a)(1)(B), an action to recover benefits due or to enforce . . . rights
under the terms of the plan is a coverage claim subject to ERISAs civil
remedy provisions). The civil enforcement scheme created by ERISA is
comprehensive; it completely preempts any state-law cause of action
that duplicates, supplements, or supplants an ERISA remedy.5
Montefiore, 642 F.3d at 327.
37
Whether Auroras ERISA coverage claims are arbitrable is less
clear. Compare Bird, 926 F.2d at 122 (holding that the FAA requires courts
to enforce agreements to arbitrate statutory ERISA claims); with CardioNet,
751 F.3d at 178 (stating that plan participants and their assignees have the
right to pursue ERISA claims in court rather than through mandatory
The issue of the Providers standing to file a Medicare administrative
appeal based on 42 C.F.R. 422.566(c)(1)(ii) (appeals from an organization
determination denying benefits) is not before us in this case.
4
Upon remand the trial court may determine that Auroras state-law
claims, if any, are preempted by ERISA; however, we need not reach that
issue in this opinion because the matter of standing remains unresolved.
5
11
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12